Retail Share In Stock Turnover Hits Highest In A Decade
Petting the stock market bull (Photographer: Dhiraj Singh/Bloomberg)

Retail Share In Stock Turnover Hits Highest In A Decade

In the past year, an unrivalled equity rebound from the lows of the pandemic drew retail investors in hordes. So much so that individuals directly buying shares now account for nearly half of India’s stock market turnover—the highest level in a decade.

Retailer investors contributed 45% to the turnover of India's largest bourse National Stock Exchange in fiscal 2020-21, according to the bourse’s market pulse report. And such individuals took cues from index futures and options to largely bet in the direction of the market instead of individual shares.

More than one crore new investor accounts, the most in a decade, were opened during the pandemic-ravaged fiscal. That came as Indians, forced indoors during one of the world’s strictest lockdowns, looked to piggyback the rally aided by ample global liquidity, vaccine optimism, quicker-than-expected economic recovery and foreign inflows.

A few highlights that underscore the retail surge:

  • Fresh retail investor addition jumped 1.3 times over the previous fiscal in FY21. They accounted for 21% of total registered broker clients.

  • Share of retail investors in the cash market rose, participation of foreign and domestic institutions declined.

  • The average daily turnover of internet-based trading rose 70% year-on-year in the cash market to Rs 15,400 crore in FY21.

  • Equity derivatives' average daily turnover rose 43.1% year-on-year to Rs 31,100 crore.

The total cash market turnover in March stood at Rs 13.9 lakh crore, a jump of 71.7% over a year earlier. It, however, declined 14% over February amid the second wave and inflation concerns.

While direct retail participation in the segment has increased steadily since 2015-16, it jumped 6 percentage points in FY21. By comparison, the share of domestic institutions like mutual funds and insurers declined.

Turnover in the equity derivatives segment for March jumped 32.8% year-on-year to Rs 30 lakh crore. It fell 11.9% over the previous month because of concerns about rising Covid-19 cases and inflation.

After falling for two years, retail share in the segment rose in FY21. Participation of FIIs, however, fell. Proprietary trading leads the segment.

Within the derivatives, retail investors piled more into index options and index futures.

Retail investors’ participation in this segment jumped, leading all categories in FY21. The increase in retail share indicates preference to bet in the direction of the market, rather than on individual stocks.

Domestic institutions saw a decline because of regulatory restrictions.

The share of individual investors remained steady in 2020-21, while participation of proprietary traders increased.

Individual investors’ share in index options premium turnover jumped, in line with the trend of the last six years. DII participation remains negligible due to regulatory restrictions.

While the contribution of proprietary traders rose during the pandemic, it has fallen in the last six years.

Proprietary trading dominates this segment with a 48% share in the premium turnover, followed by individuals at 32% in FY21.

Proprietary traders (excluding banks) also dominate this segment despite a decline in their share in the last six years. Individual investors’ share jumped the most in FY21 as they maintain the second spot.

FII participation rose since 2018-19 even though it fell in FY21.

The participation of retail, banks, and corporates inched up in FY21; while share of proprietary traders (excluding banks) declined.

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